The coal supply contracts

SaskPower has three coal-fired power stations - Boundary Dam (672 megawatts - MW), Poplar River (582 MW) and Shand (276 MW) with a total capacity of 1,530 MW. Boundary Dam and Shand are supplied by the Estevan Mine and Poplar River by the Poplar River Mine. Both mines are owned by the Colorado-based Westmoreland Coal Company.

Yesterday Westmoreland announced that it had signed an agreement with SaskPower to continue supplying the Poplar River power station with coal. This new agreement extends the current contract, which expires this year, and is for the supply of 58 million tonnes of coal for the 14 years from 2016 through 2029.

Location of SaskPower's three coal-fired power stations

This announcement adds to a similar one in July last year when Westmoreland concluded a ten-year supply agreement with SaskPower from its Estevan Mine. That contract is for a total of 60 million tonnes from 2015 through 2024.

This 118 million tonnes of coal, when burned to generate electricity, will release approximately 130 million tonnes of Greenhouse Gases (GHGs) or 120 million if one excludes the one million tonnes which will be captured annually at Boundary Dam Unit 3 Carbon Capture and Storage (CCS).

What this says about SaskPower plans for coal-fired generation

Given the heat content of Saskatchewan lignite (12.2 million BTU/tonne) and the heat rate of Saskatchewan coal-fired plant (9.8 million BTU/megawatt hour), it follows that 800 kilograms of lignite are required to generate one megawatt hour of electricity. From this one can estimate how much SaskPower intends to rely on its coal-fired generation capacity in the coming years.

Poplar River. 58 million tonnes over 14 years equates to 4.1 million tonnes annually for each year from 2016 to 2029. This amount of coal will allow the Poplar River Power station, for each of the next 14 years, to generate at least as much electricity as it has done in the recent past.

Boundary Dam and Shand. 60 million tonnes over 10 years equals 6 million tonnes annually which will allow the Boundary Dam and Shand Power Stations, for each of the next 10 years, to generate at least as much electricity as they have done in the recent past.

In other words it would appear that SaskPower has no plans, before 2024, to reduce output from any of its coal-fired power stations.

The two Westmoreland coal supply contracts will almost certainly contain various 'escape' clauses allowing SaskPower to cease offtake under certain conditions (for instance a very high carbon price). Nonetheless what the two contracts indicate is SaskPower's current intention to proceed with Carbon Capture at Boundary Dam Units 4 & 5.

SaskPower does not intend to make a final decision until 2017 at the earliest. Provincial electricity users will be watching with great interest: not least of the reasons being the $1-billion of operating losses already incurred by the Unit 3 CCS retrofit.